Added on April 17, 2012 John O' Gorman

Do You Know The Buyer’s ‘Should-Cost’ Estimate?

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What the buyer expects your solution to cost has a major bearing on getting the sale. Yet most salespeople try to sell without actually knowing what the buyer’s ‘should-cost’ estimate is. That does not make sense.

The reality is that most buyers don’t set about buying something without having an idea (however vague) of what it ‘should-cost’. Any salesperson who sets off to buy something important either for work, or personally does exactly the same thing. It is just common sense.

“Shaping the buyer’s ‘should-cost’ model is key to your success…”

When Are ‘Should-Cost’ Estimates Created?

With longer and more complex buying cycles, it is important for the buyer to set pricing or budgetary parameters at the earliest stages. Indeed, ‘what is it likely to cost?’ is going to be one of the earliest questions that the buyer is going to have to answer.

In most cases the buyer will have to set out a broad ‘should’ or ‘could’ cost estimate before a formal buying process ever gets under way. The problem is that this initial estimate can overshadow the full procurement process.

What Are The Implications For The Salesperson?

Sellers who don’t know, or fail to address the buyer’s price expectations run the risk of chasing phantom opportunities where there simply is not the ability to pay (due to poor prequalification). They also risk being ‘beaten-up on price’, or being out-sold by a competitor.

“Many buyers are amateur accountants in search of your margins…”

‘Should-Cost’ Estimates Are Often A Secret

While salespeople may ask a prospect what he, or she expects, or plans to spend they will rarely get an honest answer. Little surprise either!

Buyer’s rightly fear that answering such question sets the parameters for the seller’s pricing. They are reluctant to share their ‘should-cost’ price expectation because they want to better it.

So, while most buyers have an expectation of price, they are unlikely to reveal it.

Does Your Buyer Think He/She Is An Accountant?

“Everybody is an amateur accountant these days” exclaimed a sales manager recently, as yet another prospect probed into the supplier’s costs and margins.

Expressing the frustration experienced by many salespeople the manager continued: “Buyers think they have a right to know, or worse that they already know the business model of the supplier – something that has taken many suppliers years to establish and indeed refine. Yet with a few simple formulas in a spreadsheet the buyer thinks he can capture, even rewrite the economics of the suppliers business!”

The manager may well be right, but the reality is buyers are increasingly inquisitorial in their desire to understand just how low they can get the supplier’s price. That is their job!

Faced with this reality the seller must deliberately intervene to shape the buyer’s ‘should-cost’ model.